One of many largest TSX corporations working within the aviation trade, Bombardier (TSX:BBD.B) inventory is valued at a market cap of $5.4 billion. Whereas the TSX inventory has greater than tripled investor wealth within the final three years, it has trailed the broader markets by a large margin within the final decade.

Since June 2003, Bombardier inventory has misplaced over 50% in market worth. So, an funding of $1,000 on this firm 10 years again can be value $4,740 at the moment. Comparatively, the TSX index has surged 123% on this interval after adjusting for dividends.

However historic returns shouldn’t matter a lot to future buyers. Let’s see if Bombardier can ship outsized positive aspects to buyers in 2023 and past.

What does Bombardier do?

Bombardier is a number one producer of enterprise jets. Armed with 5,000 plane in service, Bombardier owns and operates a world fleet whereas catering to multinational companies and governments, in addition to non-public people. These plane are additionally utilized in special-mission roles starting from surveillance to medical evacuations and dignitary transport.

Moreover, the corporate supplies aftermarket and help services, which embody wholly owned service centres within the U.S., Asia-Pacific, and Europe.

In 2022, Bombardier elevated gross sales by 14% to $6.9 billion whereas adjusted EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) was up 45% at $930 million. It elevated EBITDA margin by 300 foundation factors to 13.5% in 2022.

Resulting from bettering revenue margins and a robust order consumption, Bombardier ended 2022 with free money move of $735 million, a rise of $635 million yr over yr. Whereas rates of interest have elevated steadily within the final 15 months, Bombardier’s widening income have allowed it to decrease debt by $1.1 billion in 2022. Since December 2020, its complete debt has declined by $4.1 billion.

On the finish of Q1, Bombardier’s money steadiness stood at $1.1 billion, whereas complete debt was $6 billion. It additionally ended the quarter with an order backlog of $14.8 billion, indicating a gentle demand profile.

What subsequent for Bombardier inventory and buyers?

The corporate now expects to ship a minimum of 138 plane this yr, producing $7.6 billion in gross sales and greater than $1.1 billion in adjusted EBITDA. Analysts additionally anticipate adjusted earnings per share to extend to $4.21 in 2023 and $5.44 in 2024, up from $1 in 2022.

So, the TSX inventory is priced at 14 instances ahead earnings. This valuation is kind of low-cost, given adjusted earnings are forecast to extend by 174% yearly within the subsequent 5 years.

Bombardier launched the International 8000 jet in 2023, which is able to enter service in 2025 and be a key income driver for the corporate. The plane would be the quickest flying airplane in enterprise aviation with a max velocity of Mach 0.94, or 94% of the velocity of sound.

Bombardier inventory is down 22% from all-time highs and trades at a reduction of over 35% to consensus worth goal estimates.

Whereas Bombardier continues to enhance its monetary profile, its debt-heavy steadiness sheet could act as a headwind, given elevated inflation ranges, rising rates of interest, and the specter of an upcoming recession.